Spectrum Decisions Delay Carriers' Expansion Plans

Separate decisions by a U.S. appeals court and by FCC Chairman Michael Powell will slow the ability of select wireless carriers to expand network capacity, enter new geographic markets, or implement select 3G technologies.

In one decision, the appeals court ruled that the FCC violated the U.S. bankruptcy code in January when it reauctioned PCS-band licenses repossessed from bankrupt NextWave Telecom in 95 basic trading areas (geographic markets). The re-auction also included spectrum repossessed from other companies that, like NextWave, won spectrum during the first PCS-band auctions in 1996 but later fell into Chapter 11.

In January's re-auction, licenses for 158 basic trading areas, with a combined population of about 170 million people, were won by carriers such as AT&T Wireless, Cingular, Verizon and Leap Wireless. (See pages 34 and 35, for background on the 1.9GHz auction.)

In the second decision that will delay carrier expansion plans, FCC Chairman Powell sought a postponement of the previous administration's July 2001 deadline for identifying new spectrum for 3G service and for selling licenses in that spectrum by Sept. 30, 2002. In a letter to Commerce Department Secretary Donald Evans, Powell said "the public interest would be best served by additional time for informed consideration, even if this results in some delay in reaching allocation decisions."

Reports by the staff of the FCC and National Telecommunications and Information Administration (NTIA) have identified the 1710-1755MHz and 2100-2150MHz bands for 3G use, but the reallocation is opposed by the bands' incumbent users, primarily the Defense Department and fixed-wireless carriers.

The delay in these auctions follows an FCC decision late last year to delay the auction of 747-762MHz and 777-792MHz spectrum until Sept. 12 from March 6, 2001. Carriers sought the postponement so they could assess their spectrum needs following the 1.9GHz auctions.

Under current HDTV-transition policy, the UHF TV stations operating on channels 60-69 in the 700MHz spectrum must give up their analog channels, but not until the end of 2006 at the earliest, and likely sometime later.

In the NextWave case, the FCC hasn't announced whether it will appeal the court decision. In the meantime, NextWave announced that it secured $200 million in funding to finance initial construction of a CDMA voice-and-data network in two markets and a data-only network in 93 other markets over the next 10 months. The company would reportedly sell its airtime to other carriers. NextWave also plans to file a reorganization plan to emerge from bankruptcy.

Meantime, the Cellular Telecommunications and Internet Association (CTIA) lauded Powell's decision to delay the auction of spectrum intended for 3G service. The association said the decision would allow the bands "to be incorporated into a larger long-term spectrum-management policy" that will save millions of dollars in carrier costs.